DeepSeek Provides European Technology Companies an Opportunity to Compete in the Global AI Landscape.

Hemanth Mandapati, the head of the German startup Novo AI, jumped on the DeepSeek chatbot bandwagon just two weeks ago, moving away from OpenAI's ChatGPT.

He mentioned in a chat at the GoWest conference for venture capitalists in Gothenburg, Sweden, "If you have built your application using OpenAI, you can easily migrate to the other ones ... it took us minutes to switch." 

According to discussions with several startup leaders and investors, DeepSeek is shaking things up in the AI world by providing access to the technology at a much lower cost. This could also push other AI companies to enhance their offerings and lower their prices.

Mandapati noted, "There was an offer from DeepSeek which was five times lower than their actual prices." "I am saving a lot of money and users don't see any kind of a difference."

European tech startups have had a tough time keeping up with their U.S. counterparts due to funding challenges, but many believe DeepSeek could change that.

Seena Rejal, the chief commercial officer of British company NetMind.AI, another early DeepSeek user, said, "This is a big leap towards making AI more accessible and balancing the scales against Big Tech."

Bernstein analysts estimate that DeepSeek's prices are 20 to 40 times lower than similar models from OpenAI.

While OpenAI charges $2.5 for processing 1 million input tokens, DeepSeek is currently offering the same for just $0.014.

Regulators are raising concerns about whether DeepSeek is using OpenAI's data or censoring responses that might reflect poorly on China, and it's under investigation in several European nations.

Sanjot Malhi, a partner at Northzone, mentioned that predicting the future of DeepSeek as a business is tricky, but its influence seems to be widespread.

WAKE-UP CALL

In 2024, venture capitalists poured nearly $100 billion into AI companies in the U.S., while Europe saw a much smaller investment of about $15.8 billion, according to PitchBook data.

On January 22, U.S. President Donald Trump announced a massive $500 billion AI initiative called Stargate, a collaboration involving OpenAI, SoftBank, and Oracle.

Investment levels in Europe have been more restrained.

Only France's Mistral stands out among the leading foundational models, which are mostly led by OpenAI, Meta, Anthropic, and Google.

DeepSeek from China gained attention after revealing in a recent paper that training its DeepSeek-V3 model required under $6 million in computing power using Nvidia H800 chips. It has since surpassed ChatGPT to become the top-rated productivity app on the Apple App Store.

"This is a wake-up call that bigger isn't always better," stated Fabrizio Del Maffeo, CEO of Axelera AI. "By making models more attainable to everyone, the total cost of ownership and barriers to building innovative tech are lowered which can be a catalyst for the whole industry."

While some analysts are skeptical about DeepSeek's claimed training costs, they do agree that it’s still lower than those of similar American models.

"I see DeepSeek as a tremendous opportunity for companies like ours," said Ulrik R-T, CEO of Denmark's Empatik AI. "It showed that we do not need huge budgets to be able to achieve our vision."

COST VS SAFETY

The competition over pricing may have already begun.

Last week, Microsoft made OpenAI's o1 reasoning model available to all Copilot users at no cost, foregoing the standard monthly subscription fee of $20.

"AI prices are going down, so future usage is probably going where there is transparency, which is usually open source, even though it's in China," noted Joachim Schelde of Scale Capital.

Larger corporations, including Finland's Nokia and Germany's SAP, are taking a more measured approach to transitioning.

"Cost is just one factor," stated Alexandru Voica, Head of Corporate at Synthesia in the UK, which was last valued at $2.1 billion. "Other factors are: 'do you have all the security certifications, the frameworks, the software ecosystem that allows companies to build and integrate with your platform?'"